Amendment of SEC MC No. 117, S. of 2018 on the Revision of the GIS to Include Beneficial Ownership Information ("2019 Revision of the GIS")

July 26, 2019 SEC MEMORANDUM CIRCULAR NO. 15, S. 2019 TO : All SEC Registered Domestic Corporations Required to Submit the General Information Sheet (GIS) SUBJECT : Amendment of SEC Memorandum CircularNo.17, Series of 2018 on the Revisionof the GeneralInformation Sheet (GIS) to Include BeneficialOwnership Information ("2019 Revision of the GIS") By the authority vested in the Securities and Exchange Commission (SEC) under Republic Act No. 11232 otherwise known as the Revised Corporation Code of the Philippines (RCC) and pursuant to its mandate to assist in the implementation of the Anti-Money Laundering Act (AMLA), as amended, and the Terrorist Financing Prevention and Suppression Act (TFPSA) and their respective Implementing Rules and Regulations, the Commission En Banc in its meeting on 09 July 2019 approved the herein amended version of SEC Memorandum Circular No. 17, Series of 2018 on the Revision of the General Information Sheet (GIS) to Include Beneficial Ownership Information. HTcADC SECTION 1. Coverage . This Memorandum Circular shall apply to all SEC registered stock and non-stock domestic corporations required to submit the GIS under existing laws, rules and regulations. SECTION 2. Definition of Terms . 2.1. "Beneficial Owner" refers to any natural person(s) who ultimately own(s) or control(s) or exercise(s) ultimate effective control over the corporation. This definition covers the natural person(s) who actually own or control the corporation as distinguished from the legal owners as defined herein. Such beneficial ownership may be determined on the basis of the following: Category Description A Natural person(s) owning, directly or indirectly or through a chain of ownership, at least twenty-five percent (25%) of the voting rights, voting shares or capital of the reporting corporation. This is without prejudice to ownership thresholds that may be imposed by other regulators. B Natural person(s) who exercise control over the reporting corporation, alone or together with others, through any contract, understanding, relationship, intermediary or tiered entity. C Natural person(s) having the ability to elect a majority of the board of directors/trustees, or any similar body, of the corporation. D Natural person(s) having the ability to exert a dominant influence over the management or policies of the corporation. E Natural person(s) whose directions, instructions or wishes in conducting the affairs of the corporation are carried out by majority of the members of the board of directors of such corporation who are accustomed or under an obligation to act in accordance with such person's directions, instructions or wishes. F Natural person(s) acting as stewards of the properties of corporations, where such properties are under the care or administration of said natural person(s). G Natural person(s) who actually own or control the reporting corporation through nominee shareholders or nominee directors acting for or on behalf of such natural persons. H Natural person(s) ultimately owning or controlling or exercising ultimate effective control over the corporation through other means not falling under any of the foregoing categories. I Natural person(s) exercising control through positions held within a corporation ( i.e ., responsible for strategic decisions that fundamentally affect the business practices or general direction of the corporation such as the members of the board of directors or trustees or similar body within the corporation; or exercising executive control over the daily or regular affairs of the corporation through a senior management position). This category is only applicable in exceptional cases where no natural person is identifiable who ultimately owns or exerts control over the corporation, the reporting corporation having exhausted all reasonable means of identification and provided there are no grounds for suspicion. 2.2. "Beneficial Ownership Information" refers to the identification documents or information on the beneficial owner of the corporation as required under this Circular. 2.3. "Direct Ownership" refers to ownership of shares in the reporting corporation and not through ownership of shares in a corporate shareholder nor any intermediate layers of corporate shareholders. 2.4. "Dominant Influence" refers to a situation in which the instructions or directions given by any natural person, who may or may not be a stockholder of the reporting corporation, on the management or policies of the corporation, are always or almost always followed or carried out. 2.5. "GIS" refers to the General Information Sheet. 2.6. "Grandfather Rule" refers to the "method by which the percentage of Filipino equity in a corporation engaged in nationalized and/or partly nationalized areas of activities, provided for under the Constitution and other nationalization laws, is computed, in cases where corporate shareholders are present, by attributing the nationality of the second or even subsequent tier of ownership to determine the nationality of the corporate shareholder." 1 For the purpose of this Memorandum Circular, the reference to the Grandfather Rule shall be limited only to the method of computing the percentage of indirect ownership in determining the beneficial owner of the reporting corporation and shall not affect its applicability in determining the nationality of a corporate shareholder. 2.7. "Indirect Ownership" refers to the type of ownership through one's percentage of ownership in a corporate shareholder of a corporation or through layers of corporate shareholders. 2.8. "Legal Owner" means the natural or juridical person who, in accordance with the pertinent provisions of Philippine law, owns or has the controlling ownership interest over the corporation or has the ability of taking relevant decisions within the corporation and impose those resolutions. 2.9. "Multiple Layers" refers to the layers of corporations comprising the ownership structure of the reporting corporation. aScITE 2.10. "Reporting Corporation" refers to the corporation submitting or required to submit the GIS to the Commission. 2.11. "Senior Managing Official" refers to the natural person who exercises executive control over the daily or regular affairs of the corporation through a senior management position, such as a chief executive officer (CEO), chief financial officer (CFO), managing or executive director, or president. 2.12. "Ultimate Effective Control" refers to any situation in which ownership/control is exercised through actual or a chain of ownership or by means other than direct control. This may be achieved through, but not limited to, any of the following situations: a) direct or indirect ownership of at least twenty-five percent (25%) of the voting shares or capital of a corporation or otherwise has or shares voting power, which includes the power to vote, or to direct the voting of, such security; and/or investment returns or power, which includes the power to dispose of, or to direct, the disposition of such security; b) the ability to elect a majority of the board of directors, or any similar body, of a legal person or arrangement; or c) any situation in which: (i) a person has the ability in fact to exert a dominant influence over the management or policies of a legal person or arrangement; or (ii) a majority of the members of the board of directors of such legal person or arrangement, or any equivalent body, are accustomed or under an obligation, whether formal or informal, to act in accordance with a given person's directions, instructions or wishes in conducting the affairs of the legal person or arrangement. 2.13. "Voting right" as used in Section 4 (i) and Category A under Section 2.1, refers to the right of the members of a Non-Stock Corporation to vote which may be limited, broadened, or denied in the Articles of Incorporation or the By-Laws. SECTION 3. Disclosure of Beneficial Ownership Information . To ensure timely access to adequate, accurate and current information on the beneficial ownership and control of SEC registered corporations by competent authorities, all SEC registered corporations are required to take reasonable measures to obtain and hold up-to-date information on their beneficial owners as defined herein and to disclose the same in a timely manner in the GIS. Accordingly, the GIS is hereby revised to include such information. The following information on the beneficial owner shall be provided, to wit: a. Complete name which shall include the surname, given name, middle name and name extension ( i.e., Jr., Sr., III); b. Specific residential address; c. Date of Birth; d. Nationality; e. Tax identification number; and f. Percentage of ownership, if applicable. Such information, however, shall not be uploaded to the Commission's publicly accessible electronic database. Said information shall, nonetheless, be made accessible or available in a timely manner to competent authorities for law enforcement and other lawful purposes. SECTION 4. Identification of Beneficial Owner . Beneficial ownership shall be determined as follows: i. The identity of the natural person(s) who ultimately has controlling ownership interest in the corporation. For purposes of determining beneficial ownership, any natural person directly or indirectly, or through a chain of ownership, owning at least twenty-five percent (25%) of the voting shares or capital of the corporation, or at least twenty-five percent (25%) of the voting rights therein, as may be applicable, shall be considered as a beneficial owner. HEITAD In the event that the entity owning at least twenty-five percent (25%) of the reporting corporation is an estate, trust or partnership, the natural person owning or controlling the estate, trust or partnership shall be disclosed as beneficial owner. ii. The identity of the natural persons (if any) exercising control of the corporation through other means. iii. The identity of the natural persons composing the Board of Directors/Trustees or any similar body and/or the senior managing official of the reporting corporation. This is only in exceptional circumstances where no natural person can be identified as ultimately owning or controlling or exercising ultimate effective control over the corporation through controlling ownership interest, controlling voting rights, or through other means. The reporting corporation must be able to show that it has exhausted all other means of identifying the beneficial owner. This is subject to verification and strict monitoring by the Commission. SECTION 5. Determination of Natural Person Who Ultimately Owns the Corporation Through Indirect Ownership . In determining the natural person(s) who ultimately owns the corporation, the percentage of ownership shall be computed using the methodology applied in the "Grandfather Rule." The natural person(s) who ultimately owns at least twenty-five percent (25%) of the voting shares or capital of the reporting corporation through ownership of shares in a corporate stockholder or through multiple layers of corporate stockholders shall be considered as a Beneficial Owner. To arrive at the actual percentage of beneficial ownership in the reporting corporation, both the direct and indirect shareholdings in the corporation shall be considered. To guide reporting corporations in determining indirect ownership applying the method used in the Grandfather Rule, an example is attached to this Circular as Annex "A" . SECTION 6. Members of the Board of Directors/Trustees or Any Similar Body and/or Senior Managing Official as Beneficial Owner/s in Exceptional Cases . In exceptional cases where no natural person is identifiable who ultimately owns or exerts control over the corporation, the reporting corporation having exhausted all other means of identification and provided there are no grounds for suspicion, may consider the natural persons composing the Board of Directors/Trustees or any similar body and/or the senior managing official of the reporting corporation to be the beneficial owner(s). In the event that another corporation and not a natural person ultimately owns at least twenty-five percent (25%) of the voting shares or capital of the reporting corporation computed in accordance with the methodology used in the Grandfather Rule, the members of the Board of Director/Trustees or any similar body and/or senior managing official of such corporation may be considered as beneficial owner(s) of the reporting corporation. It is to be emphasized herein that this will be subject to strict monitoring and verification by the Commission. Any clear indication that this was resorted to despite evidence showing that the corporation has beneficial owner(s) with controlling ownership interest or through other means as defined herein shall be considered as a prima facie evidence of a violation of this Circular and the making of a false statement in the GIS. SECTION 7. Updating of Beneficial Ownership Information . The SEC shall be timely apprised of relevant changes in the submitted beneficial ownership information as they arise. An updated GIS shall be submitted to the SEC within seven (7) working days after such change occurred or became effective. For corporations with multiple layers of corporate stockholders, an updated GIS shall be submitted within the same seven-day period. In the event that the corporation with such multiple layers fails to do so, it shall submit the updated GIS within thirty (30) working days from the time such change occurred or became effective with an explanation for the failure to submit the same within the prescribed period. ATICcS SECTION 8. Obligation of Directors/Trustees and Officers . The Directors/Trustees and Officers of the reporting corporation shall exercise the due diligence required in ensuring that the requirement to disclose its beneficial owner in the GIS is complied with. This due diligence requirement is deemed complied with if reasonable measures are undertaken to obtain and hold updated information on the beneficial owner(s) of the corporation as defined herein and to ensure that such information is timely disclosed in the GIS. Such reasonable measures include the adoption of written procedures for obtaining, updating and recording beneficial ownership information and in timely disclosing the same in the GIS submitted to the Commission by the Corporate Secretary. Board and Senior Management oversight in ensuring that such procedures are observed shall likewise be required as part of the due diligence measures. SECTION 9. Validating Information . The Commission may, at any reasonable time, verify the beneficial ownership information provided in the GIS through an on-site inspection of the books and records of the corporation and/or through other means available which may include but not limited to information that may be obtained from other sources such as the books and records of other corporate entities and data gathered by law enforcement and other government agencies and/or the Anti-Money Laundering Council (AMLC) in the exercise of their respective functions. SECTION 10. Modifications in the GIS . For purposes of incorporating the modifications as provided for and adopted in this Circular, the Beneficial Ownership Declaration Page and the Attestation Page in the GIS shall be in the form as appearing in the corresponding pages in Annex "B" (GIS for Stock Corporations) and Annex "C" (GIS for Non-Stock Corporations) hereof. SECTION 11. Penalties . i. Failure to Disclose . If after due notice and hearing, the Commission finds that the reporting corporation has committed a violation of this Circular by failing to disclose, without any lawful cause, its Beneficial Owner in accordance with the provisions thereof, the reporting corporation shall be penalized as follows: For Stock Corporations with retained earnings of less than Php500,000.00: a. For the first violation Php10,000.00 b. For the second violation Php20,000.00 c. For the third violation Php50,000.00 d. For the fourth and subsequent violations Php100,000.00 For Non-Stock Corporations with fund balance of less than Php500,000.00: a. For the first violation Php5,000.00 b. For the second violation Php10,000.00 c. For the third violation Php20,000.00 d. For the fourth and subsequent violations Php50,000.00 For Stock Corporations with retained earnings or Non-Stock Corporations with fund balance of Php500,000.00 or more but less than Php5,000,000.00, the penalties shall be twice the amount of the penalties imposed for those with retained earnings or fund balance of less than Php500,000.00. For Stock Corporations with retained earnings or Non-Stock Corporations with fund balance of Php5,000,000.00 or more but less than Php10,000,000.00, the penalties shall be thrice the amount imposed for those with retained earnings or fund balance of less than Php500,000.00. For Stock Corporations with retained earnings or Non-Stock Corporations with fund balance of Php10,000,000.00 or more, the penalties shall be four times the penalties imposed for those with retained earnings or fund balance of less than Php500,000.00. The failure to submit the GIS with the required beneficial ownership information shall be prima facie proof of such violation. ii. Liability of Directors/Trustees and/or Officers of the Corporation . If the Commission, after due notice and hearing, finds that the directors/trustees and/or officers of the reporting corporation, without any lawful cause, failed to exercise the due diligence required in ensuring compliance with the requirement to disclose beneficial ownership information in accordance with Section 9 hereof resulting in no beneficial owner(s) as defined herein being timely disclosed in the GIS or in the non-submission of the GIS containing such information within the prescribed period, the following penalties shall be imposed upon such directors, trustees and/or officers: TIADCc a. For the first violation Php5,000.00 b. For the second violation Php10,000.00 c. For the third violation Php20,000.00 d. For the fourth and subsequent violations Php50,000.00 The absence of written procedures and policies for obtaining, updating and recording beneficial ownership information and for the timely disclosure thereof to the Commission, as provided in Section 9 hereof, or the lack of Board or senior management oversight to ensure compliance with such policies and procedures, shall be prima facie proof of the failure to exercise the due diligence required. Every submission of the GIS without the required beneficial ownership information or every instance of non-submission or late submission of such GIS, arising from the failure to exercise the due diligence required, shall be considered as a prima facie violation of the duty to exercise due diligence by said directors/trustees and/or officers. iii. The foregoing penalties are without prejudice to the imposition of other applicable penalties as provided for under the RCC, SRC and other rules and regulations of the Commission. SECTION 12. Submission of GIS in Electronic Format . The submission of the GIS in electronic format pursuant to SEC Memorandum Circular No. 6, Series of 2006 is hereby suspended until further notice. SECTION 13. Submission of the GIS with the Required Beneficial Ownership Information . The GIS Form as provided for in this Circular shall be used by corporations whose GIS are due for submission beginning 31 July 2019 . SECTION 14. Amendment/Repeal . All rules, regulations, orders, circulars and issuances of the Commission that are inconsistent with this Memorandum Circular are hereby amended and/or repealed accordingly. SECTION 15. Separability Clause . If any portion or provision of this Circular is declared unconstitutional or invalid, the other portions or provisions hereof, which are not affected thereby shall continue in full force and effect. cSEDTC SECTION 16. Effectivity . This Memorandum Circular shall take effect immediately after its publication in two (2) national newspapers of general circulation and its posting in the Commission's website. Pasay City, Philippines, July 26, 2019. FOR THE COMMISSION: (SGD.) EMILIO B. AQUINO Chairperson ANNEX A ANNEX B General Information Sheet Stock Corporation ANNEX C General Information Sheet Non-Stock Corporation Footnotes 1. Villanueva, Cesar Lapuz, Philippine Corporate Law p. 54, cited in Narra Mining and Development Corp., et al. vs. Redmont Consolidated Mines Corp. , G.R. No. 195580, January 28, 2015. Published in the Manila Bulletin and Manila Standard on July 27, 2019.